Corporate News: A Legal Update

On April 12, 2024, the United States Supreme Court issued a unanimous ruling in Macquarie Infrastructure Corp. et al v. Moab Partners, L.P., et al. which held that omissions, by themselves, are not subject to private rights of action under Rule 10b-5, but omissions can support an action if they make other statements materially misleading.

The Division of Enforcement (“Division”) for the Securities and Exchange Commission (“SEC”) released the 2024 Examination Priorities Report (“Report”) highlighting the key areas the Division will examine in 2024.

The recent issues involving community and regional banks, such as Silicon Valley Bank, Signature Bank, and First Republic, have led depositors to flock to the larger banks, such as Chase. Chase’s CFO Jeremy Barnum, in Chase’s earnings call last Friday, stated that Chase saw “significant new account opening activity and meaningful deposit and money market fund inflows” and they estimate that they “have retained approximately $50 billion of these deposit inflows at quarter end.” Barnum elaborated that these inflows reversed an intra-quarter trend of increased deposit outflows.

Private placements can be a great resource for companies to raise capital in the current economic environment. They are cost effective in comparison to public offerings and provide greater decision-making latitude to current owners. Raising capital while keeping an entity private is an effective method for growing a business. Keeping a company private helps officers and directors take a long-term view of the company. Further, staying private has reduced administrative costs compared to public companies because private companies do not have the ongoing reporting obligations of public companies. Private placements allow companies to structure investments to meet their needs by issuing debt or equity investments under their terms. Whether the company is a newly formed start-up seeking the capital necessary to grow its business, or the company is more mature and would like to expand its ownership group by taking on new investors, private placements are versatile in how they serve companies.

On August 24, the Securities and Exchange Commission (SEC) released a draft of its strategic plan for 2022 – 2026, outlining its key initiatives for the next four years. The SEC’s mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Its strategic plan is intended to further that mission by laying out goals that will guide its policy and decision making.

According to the Consumer Price Index (CPI), the United States is facing the highest inflation numbers in over 40 years. On April 12, 2022, it was announced that the CPI has increased 8.5% over the last 12 months, based on March 2022 data. The CPI has been steadily increasing since May 2020, and the impact is being felt by individuals and businesses.